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The pursuit of what the major banks have labelled ‘quality business’ has changed the mortgage broking landscape – possibly forever.
Three of the four majors have now introduced minimum volume requirements in some shape or form, sending a shockwave through the broking industry.
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In 2008, NAB became the first of the big banks to declare its intention to be more selective about the brokers it did business with. The Commonwealth Bank and Westpac have now followed suit, announcing last month that they would introduce minimum volume quotas and that brokers who fell short would lose their accreditation.
ANZ now stands alone as the only major bank that remains firmly committed to dealing with the broader market.
The banks are well within their rights to demand better quality business from their broker partners and a shakeup of the industry is long overdue.
While it’s likely only a minority of brokers are to blame, sloppy applications have certainly contributed to the desperately slow turnaround times most of the big banks have experienced over the last six months.
Brokers have also long been criticised by the banks for falling short of the high standards of branch-based professionals and this has been a convenient justification for the stark differences in servicing levels enjoyed by the two channels.
But while the selective approach being adopted by most of the majors will doubtless improve lender efficiencies, it is also likely to have the unfortunate effect of penalising brokers across the board – both good and bad.
The ‘quality’ brokers the big banks want to do business with will have to ensure they place an even spread of regular business across each if they are to stay accredited with all.
This throws up the unpalatable prospect that independent brokers will feel obliged to place business strategically to ensure their ongoing accreditation, rather than considering the best interests of the customer.
When commissions were cut last year most banks also put in place metrics that were designed to ensure better quality business from brokers.
The vast bulk of loans are now lodged online – 100 percent for NAB and now CBA.
Aggregation groups have worked hard with their members to improve the quality of the business they deliver but it seems this was not enough.
So where does the industry go from here?
Only time will tell if brokers can successfully and ethically juggle the demands of the majors without sacrificing the interests of the consumer.
But by narrowing their scope, the major banks have also opened up the market to other lenders.
While few institutions are flush with funds right now there are certainly plenty of lenders that are still competitive – and only too willing to take on new broker business.
Alex Whitlock
Publisher, Mortgage Business
